Dan Barnes Welcome to ETF TV News – your updates on the latest exchange traded funds and products launched over the previous week. I’m Dan Barnes. Today, we’re going to be speaking with Greg Friedman, head of ETF Management and strategy at Fidelity Investments, about the launch of the Magellan ETF. Joining me, of course, as every week is Deborah Fuhr. Deborah, welcome back to the show.
Deborah Fuhr Thank you.
Dan Barnes So Deborah, can you give us a quick update on what’s been launched over the previous week?
Deborah Fuhr So last week we saw 23 new ETF listings, 29 cross-listings. There were 17 issuers that brought products to market that were listed on nine exchanges, eight one U.S., one in Canada, five in Europe and nine in Asia Pacific. 10 were active and 22 of the products were focused on equities.
Dan Barnes As I mentioned, we’re going to be looking at the Magellan ETF, what can you tell us as background for that?
Deborah Fuhr So we saw Fidelity list four new ETFs last week on CBOE. It takes their total number of products to 37 ETFs, 24 billion. The new products launched last week were a growth opportunities, a real estate investment, a small mid-cap opportunities and a Fidelity Magellan ETF. And I think there’s probably very few people in the world that do not know of the Fidelity Magellan Fund. It was brought to market back in 1963, Peter Lynch was the manager and very well known from 1977 to 1990. He took it from 18 million to 14 billion. So I find it interesting that Fidelity has decided to create a Fidelity Magellan ETF, so I’d like to ask Greg, who we’ve known for many years, going back to the old webs. Greg, welcome to ETF TV.
Greg Friedman Thank you for having us. Pleasure being here today.
Deborah Fuhr So can you describe the decision making process behind the launch of the Fidelity Magellan ETF last week?
Greg Friedman We’re focused on bringing the best of Fidelity to our clients. We’re wrapper agnostic. We understand that some places mutual funds work better than ETF in some cases, and for some clients, ETF work better than mutual funds. So we’re focused on: what’s our best capabilities, how do we solve our client’s needs and solve our client’s investing challenges? So the Magellan Fund obviously has a great heritage at Fidelity and a name and a brand that really signifies what we stand for, fundamental bottoms up investing that brings excess returns to our clients. We’ve had great returns, the 1-, 3-, 5-years on this fund, and we thought this would be a good one to bring out for our clients. Our clients are asking for this type of products. So it is great that we have the original wrapper that you spoke about, Deb, from 1963, and we’re just very excited to be able to bring that same strategy and that same mindset to an ETF form.
Deborah Fuhr Are there different types of investors that prefer ETFs over mutual funds?
Greg Friedman Absolutely. I remember you and I were at these conferences where they always talked about active vs passive and the real answer is both. And now we’re having a lot of the same discussions with the same people, mutual fund or ETF, and the answer is both. You have some platforms where mutual fund works better, and some platforms it’s the ETF. Just as some clients prefer mutual funds and some clients prefer ETFs. And for us at Fidelity, we’re seeing very, very little cannibalization under 5%, and I think that really goes to the fact that the ETF client is very different than your traditional mutual fund client. So as we bring in more and develop more ETFs and really become a leader in the ETF space, these are new clients to our firm. But the thing that is interesting is on these active ETFs, now we’ve got seven that we started back on June 4th, we have around 15% of clients buying both mutual funds and ETF of the same strategy. So I think it goes to our belief in bringing choice and value innovation for our clients and the way the clients choose what wrappers, since we are wrapper agnostic, could be a mutual fund, ETF, SMA, whatever works best for that particular client.
Deborah Fuhr When you talk about choosing between the different wrappers, what is the decision making process you think investors should look at when they’re making that decision?
Greg Friedman You know, what kind of account? Is it taxable, nontaxable? Some of the characteristics that mutual funds have, so dollar-cost-averaging, half-fractionals, ETFs have more tax efficiency and the ability to trade intraday. So luckily we have the same strategy beneath it, so we’re still providing that excellent bottom up fundamental stock picking up that Fidelity is known for. But each wrapper has its own characteristic, which will then suit that particular client as they’re looking at what fits best for their portfolio.
Deborah Fuhr And should we expect any further launches this year from you? Can you share any insights?
Greg Friedman I cannot share anything at this time, but we do have a whiteboard chock full of ideas about the mutual fund space, the ETF space, some A space, active and smart bata. And our focus as a firm is, obviously there is a huge industry that’s growing and we’re very proud to be part of that industry, so we’re focused on smart beta solutions and active. So I think if you look at us going forward, that’s where we’ll be playing most of the new product.
Dan Barnes Greg, that has been fantastic, thanks so much.
Greg Friedman Well, thank you for having me, it’s been a pleasure being here.
Dan Barnes Deborah, can you give us a bit of detail on some of the more interesting other funds that we’ve seen over the previous week?
Deborah Fuhr Yes, I think if we turn to Korea, there were four new ETFs listed by different issuers of products on an index that was recently created in November, based on the fact that the Korean government is trying to move to a carbon neutral environment by 2050. And so they are investing in companies that are making movements in the right direction. So I think this is an interesting trend in terms of ESG. We’ve also seen a number of thematics. And I think an interesting ETF that came out last week is a Polkadot (DOT) ETF. Now, you might think, do we have one on clothing? But no, this is on a block chain, so allowing block chains to talk to one another.
Dan Barnes Very interesting. That’s been great. Cool. Thanks very much, Deborah, and see you next week.
Deborah Fuhr Thank you.